However, State-owned banks continue to have higher levels of bad loans than their private sector peers.

One reason is that PSBs have a disproportionately higher share of bad loans from among large borrowers.

Data on banking frauds are also a cause for concern.

Close to 95% of the frauds reported in the six months ended September were credit-related, with PSBs again bearing the brunt of mala fide intent on the part of borrowers.

The RBI’s report has also urged to tighten the oversight framework for financial conglomerates in the wake of the IL&FS meltdown.

Thus, despite the decline in banks’ gross NPA ratio, regulatory vigil should be increased further and should not ease at any cost.

Stressed Assets

A loan whose interest and/or instalment of principal have remained ‘overdue ‘(not paid) for a period of 90 days is considered as NPA.

Restructured asset or loan are that assets which got an extended repayment period, reduced interest rate, converting a part of the loan into equity, providing additional financing, or some combination of these measures.

Hence, under restructuring, a bad loan is modified as a new loan.

A restructured loan also indicates bad asset quality of banks.

This is because a restructured loan was a past NPA or it has been modified into a new loan.

Written off assets are those amount when the bank or lender doesn’t count the money borrower owes to it.